Analysis: The Real Estate Investment Club Meeting From Hell

I recently attended a real estate investing club meeting and was absolutely shocked and angered by what I heard and saw. If you want to find out about what an investment club shouldn’t be doing, then read on.

Lack of Real Estate Education

I think at most 10 minutes of the meeting were used for investor “education.” The education involved a lecture on identifying good real estate markets to buy property in, a review of the basics from Rich Dad/Poor Dad, and some small talk about the value of attending real estate classes at a particular school. When discussing good markets to purchase property in, the speaker informed the group that the best time to buy was before the market started to appreciate and the time to sell was just before the top of the market. While this dazzling display of genius makes sense, they completely ignored all of the opportunities that present themselves at every other point in a market’s cycle. Investors can make money in ANY point in a real estate market cycle! They just have to know what they are doing! In addition, he never explained to anyone how to identify the bottom and top of a market, probably because neither he, nor anyone else can perform such a task with the ease that he presented. If it were as easy as he claimed there would be some people out there that make Buffett and Gates look like paupers.

As for the rest of the education, regurgitating Robert Kiyosaki for 2 minutes is not really what I call a great way to teach. I learned that if I work for someone else I’ll never get rich . . . it was very enlightening (smell the sarcasm?). This is not to knock Kiyosaki, but what was shared in our little meeting was rather weak.

Nothing but Sales Pitches

Through the course of my time at the meeting there were 2 people who spoke: the man I assume was running the show (“the lecturer”) and a man who was there to share with us the wonders of investing in Mexico. This guy talked for close to an hour about getting involved in a project he seemed to be running. There were presentations and more presentations. As the drool was falling from my barely conscious head, I awoke to something quite startling. In talking up the benefits of investing in Mexico, he mentioned that the US government didn’t need to know about such deals, and went on to let people know that he’d be available to discuss this in a one on one setting if anyone was interested in finding out more. Like a fly on the wall I sat there taking this in. This guy was talking to a group of people who he might have known (he certainly didn’t know me), and was essentially selling them on investing in Mexico because amongst other things, “the US government didn’t need to know.”

I was further surprised when he started to tell us that he preferred not to work with contracts. Basically, it sounded like he was telling people to invest their money with him with nothing in writing (because he only works with people he knows). That may work well for him, but I hope that no one EVER goes into a deal with anyone without something in writing. That is a quick way to losing your money. The guy was trying to sell the group on being “passive investors” (those who simply give their money to someone else to deal with), and equated everyone else as having a “real estate job” (which, following from the Rich Dad lecture made it sound ugly). He essentially said that he was like a stockbroker . . . you give him your money and in a pre-determined period of time you will be able to collect your gains. I’ve got a contract with my stockbroker (at least I did when I used one), and there is no chance I’m going to get into a real estate deal with ANYONE without a contract.

I’ve got to tell you that the whole thing sounded great. If I had no idea what I was doing, I may have fallen for the pitch, but I hope no one reading this, or anyone else, does.

The entire meeting was essentially a sales pitch for this “project.” When I quietly asked the guy next to me if all the meetings of this group were sales pitches, he responded that they were.

Overall Lessons Learned

NOTE: Not all real estate investing clubs are like this!

Real estate investing clubs should be places where members can learn, meet new people, network, and find out about deals. They should not be places where “members” are lectured to or pitched for an entire meeting. They should not be places where the only time devoted to education is spent on bad education. They should not be places where the best advice given is to not report foreign real estate transactions to the government.

If you have been to a meeting of an investment club that does this, you need to quickly find yourself another group to meet with. You’re doing yourself a disservice by sticking around.

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About Author

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

19 Comments

Sounds like you found the same clubs I came accross when I moved here. It seems most RE investment clubs here serve the people who started them and not the people who want to learn. If you have any luck finding a legit RE club pass it on vise versa. In all honesty I have given up on finding a club and gone back to gettting to know everyone I can and in time I find deals or they find me. Everyone I met when I moved here told me how hard it was to make money in CO on RE. In my opinion if you do your homework and find the right deal you can do 1 or 2 a year and do just fine. It is much easier then busting you hump for 4-5k per house @ 10 homes a year. Spend more time looking and less brain damage.

It’s amazing how many of the investment clubs are intended to line the pockets of the founders. I’ve been very disappointed. There are so many people out there looking for the easy money, that they spend a fortune on books, tapes and speakers. I agree with Barry. Take your time and do your research.

Joshua, first off great blog, added to my techno favs. It really is disheartening to discover that the majority of the general populus really has no basic understanding of how real estate works. Maybe we should make it a mandatory high school class?..

I’m especially grateful that you posted a reply to this, offering your help and giving us all the ways to contact you (errr, strike that. But I know there can’t be too many Eunices out there, so I’ll ask around and find you).

How do I get a title like yours?

{rolling eyes}

(and just so I’m not wasting a posting to complain about THAT… I, too, was frustrated to attend the two largest REI clubs in Orlando and find the same thing — although one of them has dozens of smaller focus groups each month, covering various topics… So now I filter what I can from the general meeting, and enjoy the focus groups for true networking and knowledge.)

This problem is rampant across the entire industry. As an investor and broker, I find myself invited to every variety of “seminar” you can imagine. The most frightening examples of what you are writing about are the Continuing Education course brokers are required to attend to keep their license active. They are almost always built around some form of product. The sales numbers for what ever the host may be pitching always seem to be more important then the educational aspect of the lecture.

At least once or twice a month I’m dealing with folks who ‘learned’ how to invest at some local investment club. I’m not saying they don’t have their place, but they should only be inspiring more questions for an expert.

As I often tell my clients – the real problem is, you don’t know what you don’t know.

>what if you’d like to approach them to invest their capital Jeff Brown ??

I never pursue that avenue. Why? Because mostly they’ve been hounded by so-called investment guys who couldn’t find their butts with both hands, two helpers, a map, and a GPS. 🙂

When I’m invited, I speak. I never even come close to trying to ‘sell’ anyone on being a client. I’ve learned over time, that if I give them solid information, my experience and expertise shines through, and they can choose to contact me or not. What happens most of the time, is one of the questions is, “How can we contact you?”

yep some clubs are like that, but if you are in the Kansas City area you will find that the clubs here are a little different. First off we have over an hour of networking where you can talk with vendors or other people at the event, ask questions, share deals.

We also have a speaker for about 90 minutes that teach about some topic related to real estate investing, they may have a 5 to 10 minute sales pitch at the end for thier service or their product, but they are expected to teach you something as well.

At SJREI, our policy is clear: “Educate – don’t pitch!” This applies to the regular monthly programs and the introductory JumpStart programs that I coordinate, and will be strictly applied to the upcoming Expo Silicon Valley program. Smart investors want to learn – they don’t like being pitched. Education-based marketing is a solid concept; if you teach, they will learn. Combine that with integrity, respect and straight-talk, and you’ve got a loyal fan who will do business with you. But if you simply “regurgitate Kiyosaki” and jump to the pitch, they’ll see right through you. I really liked the “no contract” idea, and investing in a foreign country to boot! “Hey, I’ve got a deal on a REO in Nogales for you; fully air conditioned after the last raid; don’t tell anyone else – cash only!”

I myself have fallen victim to an investor’s sales pitch a few years ago when I first heard about Fix & Flips and Wholesaling. He actually posted a nice, attractive ad on Craigslist about an opportunity for people with no experience. The entire meeting was him selling himself & the school he was promoting. He was trying to recruit people to spend thousands of dollars on the education, and was looking for others to do the same thing by posting ads for the school. It definitely was not what I was expecting/looking for.

Mid-Hudson Valley REIA http://www.mhv-reia.com, is one of the more reputable REIA in New York State and is still in existence. Some guru selling do occur from time to time but, there is great opportunity to learn from real life investors who freely share their knowledge and give sound advice. The meetings and events are heavily attended by New Yorkers as well as individuals from out of state.

Audrey – I believe that networking that happens at REIAs is wonderful, but the sales pitch thing is old news. REIAs build much more credibility when they focus on helping their members learn, network, and do business vs. selling expensive products to them via trainers and gurus.